KUALA LUMPUR: Malaysian Rating Corporation Bhd (MARC) expects traffic flow along Kuala Lumpur-Karak Highway (KL-Karak) and Phase 1 of East Coast Expressway (ECE1) to decline next year before staging a firm recovery in 2022.
The rating agency said on Tuesday under its sensitised scenario, it assumed a 30% and 20% decline in traffic for KL-Karak and ECE1 in FY2021 followed by a recovery to 90% of FY2020’s level in FY2022.
However, by FY2024, MARC expects a full recovery and a growth trend of 1%-2% onwards.
In the statement, MARC affirmed its AAIS rating on ANIH’s RM2.5bil senior Sukuk Musharakah programme with a stable outlook. ANIH is the concessionaire of KL-Karak and ECE1 until 2032.
“The affirmed rating reflects ANIH’s healthy cash flow generation and adequate debt coverage, underpinned by stable traffic performance of KL-Karak and ECE1, ” it said.
MARC added the rating also benefits from the subordinate and equity-like features of ANIH’s RM620mil junior bonds, which should provide some cushion against operational underperformance.
“However, high gearing remains a key rating constraint for ANIH. The stable outlook on the rating reflects MARC’s expectation that ANIH will continue to demonstrate a commendable liquidity profile by maintaining healthy cash levels over the next 12-18 months, ” it said.
The rating agency took note of the impact of the Movement Control Order (MCO) following the fall-out from the Covid-19 pandemic and how it has reduced the traffic on the two highways.
“KL-Karak and ECE1’s traffic data over April-July 2020 reflected the impact of Covid-19. Traffic on KL-Karak and ECE1 fell 47.3% and 41.5% y-o-y during the period, but have rebounded strongly since May 2020 after measures to curb the spread of the virus were eased in the country; road travel has in fact returned to pre-coronavirus levels by July 2020.
“Notwithstanding some weaknesses in the last few months following the coronavirus crisis, traffic on the mature KL-Karak and ECE1 have been on a path of steady, albeit moderate, growth, ” it said.
Road traffic for the two highways have grown at a compound annual growth rate of 1%-2% over FY2015-FY2019 and MARC expects this to continue once Covid-19 is brought under control.
Assuming the decline in the traffic flow, MARC projects average finance service coverage ratio (FSCR) at 2.15 times with a minimum coverage of 1.93 times in FY2028.
“Our projections indicate that ANIH would be able to withstand a revenue decrease of 32% y-o-y in FY2021 and still meet the covenanted 1.75 times FSCR, ” it said.